Gold has moved above $1600 for the first time since the spike up to 1611 on January 8th as trepidation may be beginning to enter equity markets, which are already at lofty levels. Many major equity indices are near all-time highs, so a pullback of a few percent isn’t out of the question. Last night (in US), AAPL was the first to warn revenues may miss target for Q1. And recently today, Apple said iphone supply woes would continue into April or longer, according to the Nikkei. In addition, Walmart announced earnings this morning while also warning that they see full year EPS between $5.00-$5.15 vs previous estimates of $5.22. Surely AAPL and WMT can’t be the only ones who have production issues because of the virus. But equity markets will come up with any excuse to buy stocks, so it’s no surprise the Dow is only down 175, as traders assume AAPL will use a lower stock price to buy back stock. Gold isn’t believing it.
Why are they warning? The economy is “great” we constantly hear. It’s because of the slowdown in China due to the coronavirus. Chinese authorities had said its business as usual. However, many are saying things only seem to be “halfway” back to normal. And each day now, we hear of more and more horror stories circulating of more coronavirus cruise ships, increased cases and fatalities, and how the numbers are “worse” than reported. Can things get worse? Will more companies issue warnings? Gold seems to think so!
On a weekly timeframe, Gold is putting in a beautiful flag formation. Although the RSI is diverging from price, it is just moving into overbought territory, warning of a possible pullback while the RSI unwinds while price is on its way to target of the flag, which is near 1720.
Price action for the Pound is going to be more likely driven by comments regarding trade negotiations between the UK and EU (which also may keep data subdued until there are agreements). Although one data point does not make a trend, don’t be surprised to see spikes in GBP if data such as this continues to impress.
On a daily timeframe, price wants nothing to do with the RSI, as price is currently not diverging with RSI and Gold just crossed above the 127.2% Fibonacci extension from the highs of September 3rd, 2019 to the lows on November 12th, 2019, at 1588. The next resistance level is the previous spike high at 1611.34, then the 161.8% Fibonacci extension of the previously mentioned timeframe at 1625.72.
On a 240-minute timeframe, Gold has been in a symmetrical triangle since putting in the recent high on January 8th and broke out today. Buyers will be looking for dips to 1585 to buy at the downward sloping trendline from the top of the triangle. This will also give the RSI an opportunity to unwind on the shorter-term timeframe. Below that is the bottom trendline of the triangle, which is near 1555/1560. There is also horizontal support at this level on the daily timeframe. 1520 also provide horizonal support if the form of previous highs back in October.
When and if more and more companies begin to warn markets of missing revenues and EPS, stocks may start to take notice. And if markets begin to believe the data from China regarding the coronavirus is inaccurate, equities may take note. Gold has a head start on stocks and price has a lot of room to move to the upside if equities do decide to come off!